Congress Replaces SGR Formula with New Payment Systems

After undergoing 17 patch jobs since its creation in 1997, CMS’sustainable growth rate (SGR) will be replaced by new payment systems through the Medicare Access and CHIP Reauthorization Act (MACRA), which President Obama signed into law late last month. Under SGR, a 21% pay cut was set to start April 1.

“I believe the ‘fix’ of Medicare’s flawed formula for determining new fee schedules will be good for all providers,” explains Charles Brownlow, O.D., F.A.A.O., founder of PMI, LLC, a consultancy for medical records and coding. “First, it ensures a small increase in reimbursements over the next several years. Second, and probably more importantly, it will eliminate all the annual uncertainty about Medicare’s fees that have left providers in doubt from November 1 of each year right up until Congress would step in to ‘fix’ the fee schedule in the first quarter of the new year.

“Third, providers won’t have to wait for the ‘corrections’ that each Medicare carrier had to make each year when the original changes — usually reductions— were set aside and corrected by Congress.”

Under the new law:

  • MACRA will freeze Medicare payment rates at prior April levels until June when rates will escalate 5% and subsequently increase from 2016 until 2019. Payment rates for services on the physician fee schedule will remain at the 2019 level until 2025; however, payments to individual providers will be adjusted via one of two ways, depending on whether the provider chooses to participate in an Alternative Payment Model (APM) program or the Merit-Based Incentive Payment System (MIPS), which replaces provider payment incentives under Meaningful Use.
  • Starting 2026, providers paid via APM will see a 75% annual payment rate increase, while payment rates for other providers will escalate 0.25% annually. In addition, those providers who participate in MIPS will get payment adjustments based on their performance compared with a threshold. Further, from 2019 to 2024, $500 million will be given to MIPS providers whose performance is viewed as exceptional.
  • Finally, from 2019 to 2024, providers who get a large portion of their revenue via APMs will pocket a lump-sum payment after each year that is equal to 5% of their Medicare payments for reimbursed services based on that year’s physician fee schedule. Providers who receive small revenue amounts from APMs don’t get an adjustment to their payments or the MIPS performance adjustment if measures and activities were reported via that program.
  • In addition to the payment changes, the law extends the Children’s Health Insurance Program (CHIP) and Medicare Advantage plans through 2017 and permanently extends the Qualifying Individuals Program and Medicaid’s Transitional Medical Assistance program through several offsets.

This article was originally published on May 1, 2015 on Optometric Management’s eUpdate.